Ford to Invest $1 Billion in Artificial Intelligence Startup

Ford Motor Co. is investing $1 billion over the next five years in artificial intelligence startup Argo AI to help build the brains of its robot cars.

The Pittsburgh company, founded last year, specializes in robotics and virtual driver systems. It will compliment Ford's autonomous vehicle team that's preparing to market a fully self-driving car in 2021.

Argo was founded by Bryan Salesky, formerly of Google, and Peter Rander, formerly of Uber. Both are alumni of the Carnegie Mellon National Robotics Engineering Center and left their respective companies late last year to form Argo AI.

"When talent like that comes up, you don't ignore that availability," said Raj Nair, Ford's product chief and chief technical officer. "This really increases the robustness of our ability to deliver this vehicle in 2021."

As part of the investment, Ford will become a majority stakeholder in Argo. Mr. Nair and John Casesa, Ford's group vice president of global strategy, will sit on Argo's five-person board.

By the end of this year, Argo will have offices in southeastern Michigan and California, according to Ford, along with its Pittsburgh headquarters. It will employ more than 200 workers at the three sites. A yet-to-be-determined amount of Ford employees will transition to working for Argo, executives said.

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Ford says the software it develops with Argo could potentially be licensed to other companies. During a conference call with analysts and reporters on Friday, CEO Mark Fields noted the investment could also include an IPO. "There's potential to create significant value in the company," Mr. Fields said.

The investment in Argo is the latest in a string of moves by Ford to offer transportation alternatives to the traditional car and truck -- a mainstay of the company since its founding.

Last March, the automaker created a Smart Mobility subsidiary to invest in emerging mobility opportunities as it targets more services outside traditional car and truck ownership.

Later in 2016 the subsidiary purchased Chariot, a San Francisco-based on-demand shuttle service that has since expanded to Austin, Texas. Ford recently said Chariot would expand to eight cities by the end of 2017, including a city outside the U.S.

Ford has also invested in LiDAR-maker Velodyne; 3D-maps-maker Civil Maps; machine vision company Nirenberg Neuroscience and computer vision and machine learning company SAIPS.

Ford has not released the financial results of Ford Smart Mobility, although a financial category labeled "all other" -- which includes Ford Smart Mobility and its Central Treasury Operations -- lost $867 million last year, up by $71 million compared to 2015, according to a document filed with the Securities and Exchange Commission. Ford says interest expense accounts for the majority of the unit's losses in 2015 and 2016.

Ford expects 2017 pretax profits to be less than the $10.2 billion it earned in 2016 because of increased investments in mobility services.

Mr. Nair said Argo will strengthen the company's virtual driver assistance team already in place. Ford has been working on autonomous vehicles for a decade before last year disclosing plans to develop a fully driverless car -- without a steering wheel or gas and brake pedals -- for commercial use in 2021.

Mr. Nair said Friday that Ford was "beyond the research phase" in developing the car, but noted there's much more advanced engineering that needs to take place. Ford is testing autonomous cars on public roads in Michigan, California and Arizona. Last year in California, it logged 590 self-driving miles for the 12 months ending Nov. 30, it said in a report to the state.